Question: Should I buy or lease my system?
There are many factors to consider when deciding whether to buy or lease your system. These factors relate to your project economics, your creditworthiness, your willingness to assume responsibility for a microhydro project as well as your appetite for tax credits (if applicable).
First you need to look at the total cost of the system. Ownership requires the up-front capital cost of designing, permitting and constructing the project. If you do not have the cash, you mitigate the up-front costs by taking out a loan. With a loan, you are the owner, but you are borrowing money from a bank to pay the capital cost of the system. A loan is simply financing, just like purchasing an automobile with a loan. It allows you to take advantage of all the savings associated with your own renewable energy generation source. If in effect, the federal renewable energy tax credits, such as the investment tax credit (ITC) may allow an owner of a system to use 30% of the value of the system as a tax credit, which works for individuals who have tax liability they would like to reduce with tax credits.
If you don’t have the cash and do not want to take out a loan you can consider a lease-to-own model. Or, you can also lease a system with no plan to transfer ownership at the end of the lease. With a lease, you are not the owner of the system, you are just paying the leasing company for a long term (usually 20 years). If you choose to lease-to-own, then the ownership of the system will transfer to you at the end of your lease term. The lease allows you to make an environmentally friendly choice without bearing the responsibility of owning a system, while reducing your electricity bill and using a predictable monthly payment structure based on a kWh rate that is established at the beginning of the lease term.
A lease versus loan have some things in common. For example, the environmental benefits are the same and monthly payments are typically structured to be less than your current electric bill.
If you have the resources available and have the tax appetite for tax credits, and/or are willing to take out a loan, then all things else being equal, owning your system even if it is financed with a loan is a preferable choice.